Fired Up

How FHN's Ken Glass lost his job and raised his net worth in the same day.

By John Branston

Ken Glass is the $450 million man.

And that's not a good thing.

When First Horizon, the bank holding company and parent of First Tennessee Bank, announced in January that Glass was "retiring" as CEO, the stock (FHN) went up $3.65 the next day. That was a 9-percent gain and a $450 million increase in market capitalization (stock price multiplied by number of shares outstanding).

In other words, Mr. Stock Market was saying "Thanks Ken, for leaving."

That's one reason CEOs make the big bucks. They get richly rewarded when their companies do well, and they get ignominiously "retired" and pushed out the door when their companies don't do well. Of course they get buckets of cash, stock, and severance pay too, but the ego has to hurt at least a little when Mr. Market turns in such a glowing review of your departure.

To be fair, the stock bump wasn't solely due to Glass, who will officially retire on the date of the company's annual meeting in April and will serve as a consultant until then. The new chairman of the board is a familiar Memphis name, Mike Rose, former CEO of Holiday Inns and Promus and a board member at First Horizon for 20 years. Some analysts and investors took this as an indication that First Horizon will be sold to a bigger bank for a premium price. First Horizon's official response is that it is not for sale.

But Glass clearly was not getting the job done to the satisfaction of the board of directors and others. He is only 60 years old, five years short of retirement. He took over from Ralph Horn in 2003. For a brief time in 2003 and 2004, the stock price touched $48, but in 2006 it traded in a range between $38 and $42. When the announcement of Glass's retirement was made, it was at $40. Investors were basically living off the four-percent dividend. Borrrringgggg.

(Disclosure: I have owned 300 to 500 shares of First Horizon in retirement accounts for approximately 20 years.)

Don't shed too many tears for Glass. According to the FHN proxy statement, he earned $909,046 in salary in 2005. His bonus was $319,000, down considerably from the $1,272,000 bonus he got in 2003. He owns or controls a total of 999,549 shares of stock. The bad news of his early retirement was offset by the good news that his net worth had jumped a cool $3.5 million in one day thanks to the stock price bump. In other words, nobody should have been happier about the retirement of CEO Ken Glass than stockholder Ken Glass.

Another happy investor was Memphian and FHN board member R. Brad Martin, formerly CEO of Saks. Disclosure statements show that in late 2006, Martin went shopping for FHN stock several times, and raised his total holdings to 327,363 shares, worth roughly $14 million. Rose owns 113,817 shares, worth roughly $5 million.

So what, if anything, does all this mean? As a newspaperman who has followed First Horizon and its leadership for 25 years, I would guess that First Horizon will do everything it can to remain independent, regardless of what the analysts are saying. Glass (a Memphis public high school graduate), Rose (a diehard University of Memphis booster), and Martin (a Memphis homeowner, parent, and former state legislator) are all Memphis guys through and through. They could, and for part of the year they do, live anywhere they want. But they keep coming back to Memphis and supporting the University of Memphis and other local causes. Team Pump-and-Dump this ain't.

One of First Horizon's problems is its awful name. It is actually three things -- a multistate bank, a bond business, and a mortgage company. It all used to be called First Tennessee, then First Tennessee National. Its television commercials featured lovely shots of the Great Smoky Mountains, the Grand Ole Opry, and the Mississippi River, with regional music to match. It branded itself as Tennessee's bank. And in the age of competitors with nebulous names like Fifth Third and Regions, it branded itself too well.